Thursday, August 11, 2022

Transylvania County’s appeal

In March, the state announced that a small contract research company in the Western North Carolina mountain town of Brevard was expanding, adding 74 employees and investing $15.8 million at its existing site.  

In a year in which Apple announced that 3,000 jobs are coming to Research Triangle Park, the Raybow USA announcement is a relatively small project. I didn’t pay much attention to it. 

I revisited the announcement when I was updating my handy spreadsheet on state economic development projects recently. I got a lot more interested in Raybow’s expansion for several reasons — because of the company’s story and its location in rural Transylvania County, mostly known to outsiders for its waterfalls and forests between Asheville and South Carolina. 

So last week, I talked to the company’s co-founders and a local economic developer. 

The Brevard company was acquired in 2019 by Raybow Pharmaceutical, a Chinese company, and it now serves as Raybow’s North American headquarters.  Before that, it was known as PharmAgra Labs, a company founded in 1999 by chemists Dr. Peter Newsome and Roger Frisbee. 

Newsome grew up in Winston-Salem, went to college at Western Carolina, got his doctorate at the University of Utah, and then came back to North Carolina to work for Rhone-Poulenc in the Triangle. Frisbee grew up in Hendersonville (“My family goes back through eternity there”), graduated from UNC Asheville and studied at Purdue. He worked for the Midwest Research Institute, then returned to North Carolina. Before he and Newsome founded PharmAgra,  Frisbee was vice president of Pisgah Labs not far from where he works today.

Newsome and Frisbee both wanted to run their own business, and in the late 1990s, they noticed that big pharmaceutical companies were increasingly outsourcing their research work.  Newsome missed the mountains, and figured that you could run a contract R&D business wherever FedEx could deliver. 

Initially, the company opened in rented space near the Asheville airport. It soon needed more room, and moved in 2003 to its present quarters in Brevard.  The building originally housed a garment manufacturer when it opened in the 1960s. Before PharmAgra bought it, it was used by a company refurbishing x-ray equipment. “So we had to strip it down to four exterior walls,” Newsome says, “and build it up from the inside. Obviously, there was no lab here, so we had to create the whole thing basically from scratch.”

What they do

Part of what the company does is to create chemicals for the drug discovery and development process.  When pharmaceutical or biotech companies want to test a drug in clinical trials, they need batches of the drug.  But they haven’t built the plants yet, because the drug hasn’t been proven effective or safe, and passed muster with the FDA.  Raybow in Brevard can make enough of the drug for the clinical trials. “It’s one thing to make a molecule for the first time, just by any means, but it’s another to make something that’s going to work well and scale up,” said Newsome. “We handle everything from early discovery to more process research.”

The first stage of the five-year expansion is to create production facilities capable of producing larger quantities.  “Everything we do now is more research and development-oriented.  The most we can get out of a batch is two to five kilos.  But that doesn’t get you real far once you’re doing clinical trials, especially if you get to Phase 2. Clients may need more like 50 kilos, and so our [initial] addition is going to allow us to make larger quantities, single-batch quantities of those materials.”

In the past year, Raybow has prepared materials for COVID-19 trials, “so there’s a lot of pressure on those on-time deliveries, obviously.”

About half Raybow’s work is for what Newsome described as “non-pharma, non-biotech” firms. For example, Raybow’s clients include electronics manufacturers, who require specialized chemicals they can’t get off the shelf. Essentially, as Newsome puts it, the company builds molecules for customers to fulfill their needs in whatever field that may be. 

About 60% of his staff of 25 has doctorates, and another 20-25%, masters degrees.  Many of the new hires will be housed in a planned research and development building.  And they will come from all over. Newsome and Frisbee recruit nationally because, as Newsome says, “there’s not a whole lot of chemists just laying around.”  They are looking for experienced chemists who are “problem solvers.”  

“We have to cast a really wide net to get the caliber of people that we need.”

What led me to Raybow

Back to my spreadsheet.  I created it several months ago to figure out where companies had opened up or expanded over the past five years.  I wanted to see where they were going, how much they were paying, what kinds of incentives they were getting from the state and what businesses they were in.

My spreadsheet went only through the end of 2020, so I needed to update it to see where we are in 2021.  So far, through the middle of May, the state has announced nearly 20 projects that have qualified for the two main incentives programs – the Job Development Investment Grant (JDIG) and the One North Carolina Fund

Over the five years spanning 2016 through 2020, the state announced around 250 of these projects, so an average of around 50 a year.   

None of these projects during this period were in Transylvania County, so the Raybow announcement was significant. But I also noticed something else that was unusual. Transylvania had moved up in the rankings from Tier 2 to Tier 3 for 2021.

The N.C. Department of Commerce divides up the state’s 100 counties into three tiers for purposes of economic development grants to companies relocating or expanding here. The 20 Tier 3 counties are the wealthiest, followed by 40 less well-off counties in Tier 2 and the least well-off 40 Tier 1 counties.

We tend to think of Tier 3 counties as Wake, Durham and Mecklenburg. But the Commerce rankings get recalculated every fall and can bounce borderline counties between tiers from one year to the next.   

And that’s what happened to Transylvania, a Tier 2 regular. Now it would seem like moving up to Tier 3 with the country-club counties would be a good thing, but not always.  In the Raybow announcement, the state noted that the company’s expansion would be eligible for a $375,000 One North Carolina Fund grant if it met certain hiring and investment targets. Now, One NC grants require a match from the local government, and the match is higher in Tier 3 than Tier 2 counties. This is intended to make it easier for less-affluent counties to meet the One NC match guidelines and encourage rural projects. 

Fortunately for Raybow, it got its paperwork in while Transylvania was still a Tier 2.  Josh Hallingse, the executive director of the Transylvania Economic Alliance, successfully pitched Project Whooping Crane, as it was known, to the county commission for the local match in December.

One significant change that moved Transylvania up in the economic rankings was its unemployment rate, relative to other counties. In the 2020 rankings, more than 30 counties had a lower jobless rate. When the 2021 rankings came out last fall, a lot more counties had higher rates than Transylvania’s 12-month average of 5.38%.  So nearby Buncombe, for example, went from Tier 3 down to Tier 2, and Transylvania moved up.

And that is one of the interesting features of our tier system, because Buncombe, with an Asheville-driven population of more than 260,000, would seem to be better off than Transylvania. But Buncombe’s thriving economy was hit hard by the pandemic and its 12-month average jobless rate more than doubled, to 7.11%. 

What also makes Transylvania look better than it may feel is a median household income of more than $51,000, close to the state average, which is probably skewed upward by affluent retirees and remote workers who have come to the mountains. That’s another one of the metrics that factors into the tier rankings. Which is good if you are a well-off newcomer, but it doesn’t reflect the local wages, which are about $34,000. (The average wage of the Raybow hires will be $76,500, according to county documents.)

The county’s ranking is also remarkable given its history. In 2002 and 2003, three manufacturing plants with nearly 1,300 jobs shut down.  The county had a labor force of less than 12,000 at the time. It would be like a big chunk of Charlotte’s banking sector leaving town suddenly.

“It was a pretty sizeable impact on our workforce, on our labor market,” Hallingse says. “We’ve kind of revisioned ourselves over the last 20 years, to kind of refocus and try to think how we do economic development here, and it’s been rewarding for the community. It’s also been a struggle.”

The county has managed to grow its population over the past 20 years to more than 34,000 residents. Brevard has a thriving downtown, and the county boasts some of the most picturesque state and national forests on the East Coast, which bring lots of tourists. Gaia Herbs operates a 350-acre farm and a manufacturing facility outside town.

“We’ve been able to grow some really interesting sectors here that bring some diversity to our economy,” Hallingse says. And, he says, the county isn’t isolated. You can get from the Asheville airport to downtown Brevard in 30 minutes, down NC 280

But the county, like many rural communities, is still feeling the impact from job losses over the past decades. Frisbee is on the board of the county’s economic alliance, and as a longtime resident of the region, he saw the economy before and after the plant closings of the early 2000s. “That wiped out the jobs in the county,” he says. “A lot of people had to move. People who had been here for generations.  They’re having to commute out of the county to find jobs in Buncombe or Henderson County.”

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